Ukraine’s hryvnia strengthens to UAH 26/USD

Ukraine’s hryvnia strengthened to UAH 25.6-25.9/USD, more than a 5% appreciation since Feb. 25, effectively offsetting the hryvnia decline since early February. Since the year start, the hryvnia has lost 8%, falling from the range of UAH 24/USD to near UAH 26/USD as of today.

Alexander Paraschiy: There are several reasons for the hryvnia appreciation in recent weeks, the first being a rebound in resource prices on the global markets in what has directly affected foreign currency inflow to the country. Secondly, an inflow of export proceeds was delayed when the coalition government began collapsing. Exporters usually keep their revenue deposited abroad if they anticipate some hryvnia decline in the near future. Since their anticipation of a possible new currency shock didn’t materialize, they started returning their proceeds to the country. Thirdly, there might have been a confidence boost from the speculation about U.S.-born Natalie Jaresko assuming the prime minister post. Her appointment would pave the way for extra loans from donors, thus affecting hryvnia exchange rate.

Though the hryvnia has appreciated for the third week in a row, we do not expect it will recover its value at the year start. As soon as exporters pay their taxes and wages, they will slow the return of their export proceeds to Ukraine. What is more, the central bank will most likely resume foreign currency purchases for gross reserves replenishment if it observes some substantial inflow of foreign cash. All in all, we do not anticipate the hryvnia to move far from the 26-27 UAH/USD range.